{"id":1004212191,"date":"2016-04-04T00:00:00","date_gmt":"2016-04-04T08:00:00","guid":{"rendered":"https:\/\/www.commercialsearch.com\/news\/cpe-uncategorized\/cmbs-conundrum-making-sense-of-the-market-and-whats-to-come-2\/1004212191.html"},"modified":"2022-12-06T15:16:42","modified_gmt":"2022-12-06T23:16:42","slug":"cmbs-conundrum-making-sense-of-the-market-and-whats-to-come-2","status":"publish","type":"post","link":"https:\/\/www.commercialsearch.com\/news\/cmbs-conundrum-making-sense-of-the-market-and-whats-to-come-2\/","title":{"rendered":"CMBS Conundrum: Making Sense of the Market and What\u2019s to Come"},"content":{"rendered":"

\"Joe<\/a>By Joseph Franzetti, Senior Vice President, Berkadia<\/em><\/p>\n

The CMBS conduit market has experienced a significant amount of turbulence since mid-2015, with triple-A spreads widening dramatically. As a result, both investors and borrowers have been thrown into a state of consternation. Those who invested in triple-As during the summer of 2015 have witnessed a fair amount of value diminution in their bond portfolio. And the news is no better for borrowers, who have seen their cost of capital continually grow and<\/em> been subjected to a tightening credit environment.<\/p>\n

Little surprise that property sales are also being impacted. There\u2019s hope that the recent rally will gain some traction and provide a pricing floor; however, the firming up of bond prices may have come at the expense of fewer deals in the market and greater credit scrutiny. If lending capacity has been decreased just to create a scarcity of bonds\u2014with the hope of improving bond pricing\u2014there will be an unjustified negative impact on liquidity for commercial real estate. If, on the other hand, this is a result of investor pricing preferences and prudence, then the market has determined what makes sense and what doesn\u2019t. Pricing and values will then reach their market-driven equilibrium.<\/p>\n

The hallmark of the CMBS market has always been that for each loan story, there\u2019s a price to be had. Better credit will bring tighter pricing and vice versa, and rationally allocated liquidity is the ultimate determinant of cost and structure. Purposely reducing credit with the hope of increasing the value of a loan will have its own unintended consequences.<\/p>\n

Navigating the Regulatory Environment<\/strong><\/p>\n

Aside from normal market fluctuations, there are regulatory cacophonies affronting the CMBS market, the effects of which will take some time to either dissipate or be digested:<\/p>\n